Clergy, HDHP and HSA

[Jon Twitchell]

HDHP (High Deductible Health Plan)
HSA (Health Savings Account)

I'm considering if this is something that would be better for us than our state-subsidized health insurance plan (which seems to be struggling, both politically and financially).

Does anyone have experience setting this up for your pastor? (Or, are you a pastor who is currently using this sort of an arrangement?)

What are the ins-and-outs?
What are the tax benefits?
When is the money taxed (on contribution or on withdrawal)?
Does this have a long-term stability?
Will it cost the church more?
Will it cost the pastor more?
Will it diminish benefits significantly?

Should I be asking any other questions?

[Jeremy D. Scott]

Jon, I'm sure I have as many questions as you do. But I'm going ahead and beginning the process, even though I'm sure that I haven't found the best solution yet.

We currently pay $1350 or so for our family. We're going to move way down to a lower policy that's about $900 a month (thus increasing our out-of-pocket co-pays and hospital stays). I'll take home the difference (about $100 a week) as income. Half of this is going to go into a new debit account for medical purposes only. The other portion will be split into life insurance (which I don't have yet :eek:) and a savings plan.

The $50 per week will accrue in that account and be used for medical purposes only until a good base is built for emergencies or until we get a real HSA.

The main disadvantage of this set up is that I will be bringing home more taxable income. It's not a huge issue right now for us, but there will be some money lost there. We're also taking a bit of risk in the early going that we have no major medical expenses (and our events of two weeks ago were almost enough to push me not to do this), but our history has been such that we only spend about $75 a month on medical expenses (co-pays). We are going to take the risk.

However, this situation will be much better for us until I can figure out how a real HSA works.

By the way, I think that William Hunter is on an HSA, if I remember correctly. I think we had another thread on this recently.

[G R 'Scott' Cundiff]

Is anyone familiar with Christian Healthcare Ministries? It used to be the Christian Brotherhood Newsletter. We were members several years ago, but never had to call on them (thank God!). We tied it into an informal heath care account with the church. Since the Newsletter didn't pay for doctor's office visits, the church held a certain amount in reserve each month and then paid our routine medical expenses and for our Newsletter obligation out of that amount each month. At the end of the year, any money left in the account was given as a salary bonus (taxable).

Again, we never needed help from the Newsletter, but, at the time I believed that it would come through for us if we needed it. I even wrote some of the people we sent money to and asked them if they would mind telling me how it went. I got glowing reports back.

My information is now over 10 years old, so it may be way out of date, but just recently I was told that it still gets good reviews. Check it out at: http://www.chministries.org/

[Jeremy D. Scott]

By the way, I think that William Hunter is on an HSA, if I remember correctly. I think we had another thread on this recently.

I found the other thread, where William talks about his plan:
http://www.naznet.com/community/showthread.php?t=9968

[Gary Swartzlander]

We provide health insurance for our staff through Humana using a policy that includes health savings accounts. We've had it about a year now and it's working very well for everyone. I'm not really up on the details, but could provide a contact if you wanted to ask questions.

[Jeremy Smallwood]

In addition to our regular health insurance, we have an FSA set up. Pre-tax dollars are deducted regularly and reimbursed as needed. We adjust yearly how much is withheld. So far, that's working out really well as a supplement for co-pays and such.

[Jeremy D. Scott]

In addition to our regular health insurance, we have an HSA set up. Pre-tax dollars are deducted regularly and reimbursed as needed. We adjust yearly how much is withheld. So far, that's working out really well as a supplement for co-pays and such.

Hey, Jeremy! Welcome to Naznet. I suppose Gary pulled you in?

What do you mean "in addition to regular health insurance"? Why keep both?

[Jon Twitchell]

I thought that an HSA required that you had an HDHP to go with it?

(Welcome, Jeremy!)

[Jeremy Smallwood]

Yeah - Creely's always beating me to punch. :laughing

Well, this is provided for us by the church. Years ago, they bought straight into the district's group-plan. That started getting out of hand, so they shopped around for our own in-house. That worked out ok, but we ended up changing carriers more times than I can remember. So they started buying a plan that carried a higher deductible, but still offered decent coverage. They implemented an HRA for deductible reimbursement - which they provide for us. AND they give us the opportunity to buy into the FSA on our own - at our own expense. My family contributes a total of 1200 per year, mainly for co-pays and over the counter medical expenses. The only drawback is the use-it or lose-it, so you need to play conservative.

[Jon Twitchell]

What you're describing sounds (to me) more like an internally-controlled FSA (Flexible Spending Account). A true HSA is held by a bank (or other custodian), and there is no "use-it-or-lose-it" stipulation... the money is yours to keep. (Although, it appears to be taxable (and penalizable) if you use it for something other than approved medical expenses).

Of course...that's just my initial reading... since I started this thread by asking questions, I certainly am not confident of my answers... :)

[Jeremy Smallwood]

Twitchell,
You're a gentleman and a scholar... FSA is what I meant to write - fingers moving faster than brain. I made the correction.

[Jon Twitchell]

Ok... yeah...that's what I have currently... A state-subsidized health insurance plan (because I'm po... I get a subsidy), and a $1000 internally-controlled FSA that is funded by a salary reduction.

What I'm not sure about is if I'd be better off with an HDHP and an HSA... I'm sure the church would go that way, as long as it didn't end up costing them more.

[Barb Bouldrey]

I have just recently joined the Christian Healthcare Ministry plan and the church has just set up a HRA...Health Reimbursement Account for me.

Our district lost its true group status because so many dropped off, but the company kept us on, hiking our premiums. Then, we have several pastors or spouses who have had major cancer issues, increasing our premiums.

Our church board set a ceiling of $2000...refusing to pay any more than that each month, so we would have to make up the difference. March 1 our premiums go up to $2300.

I am diabetic. We have tried to find different insurance for 3 years, but no one will cover me except at very high premiums.

So, I dropped off the district insurance this month and have joined the Christian Healthcare Ministry plan. And the church set up an HRA.

FIRST: We researched FSA, HRA and HSA... HRA is the only one that does not need to be reported quarterly to the IRS and is NOT considered income for us. So, we do not have to declare it as income and pay taxes and S.S. on it.

The HRA pays my office calls, prescription meds, my quarterly lab work and my monthly donation to the Christian Healthcare Ministries. The treasurer and I set up the account and I write the checks at the doctors office and pharmacy. The church decided to put in $500 a month to cover my $150 CHM plan, my regular meds and have extra to build up for my office calls and lab work. It should be enough to cover emergency calls like the flu or cold.

Christian Healthcare Ministries: This is the only option I had except having NO insurance at all. It does not cover office calls, prescriptions or regular lab work. It has a ceiling of $125,000 for the $150 plan. I can pay $40 more each month and double that ceiling amount. I may go ahead and do this.

I was forced to do this because of the awful premiums. I did not want to go out and find a part time job JUST to pay the difference of the insurance premiums.

In the process, John dropped off the district plan (BC/BS Anthem) and went with an independent Anthem plan through a broker here in town. His premiums are $767 a month instead of $1400 a month.

So, our monthly healh coverage has dropped from $2300 to $1267 a month.

If you are considering any of this, go to the Christian Healthcare Ministries website and check it out. They have been in existence 25 years and I know of friends who have been satisfied with it.

Also, google HRA and you wil find a chart showing you the difference between the FSA, HRA and HSA plans.

One other thing. The HRA money is not MINE. It belongs to the church. If we leave, the balance goes back into the church accounts. That is fine with me. One thing about this HRA is that I no longer have copays to pay at the doctor or pharmacy. So, I am personally saving money there.

OH...have you checked out the $4 prescription plan at WalMart? I just did and 3 of my 5 medications are on that list. So, dropping off the insurance that had $8 co pays for generic meds, I can still save on 3 of my meds at WalMart.

Barb

[Barb Bouldrey]

Here is the website that helped us decide which plan to use:

http://rams.fremont2.k12.wy.us/districtoffice/DOMain/hsa_compare_chart.pdf

I like the fact that the HRA does not require paperwork reporting for your treasurer and does not required reporting as income for us.

Barb

[Gary Swartzlander]

What you're describing sounds (to me) more like an internally-controlled FSA (Flexible Spending Account). A true HSA is held by a bank (or other custodian), and there is no "use-it-or-lose-it" stipulation... the money is yours to keep. (Although, it appears to be taxable (and penalizable) if you use it for something other than approved medical expenses).

Of course...that's just my initial reading... since I started this thread by asking questions, I certainly am not confident of my answers... :)

I believe you are correct.

[Jeremy D. Scott]

Just an update...

I spent a while on the phone yesterday with our representative who originally set up our health insurance. Turns out it was a good thing that I've been researching this stuff lately - we just discovered that Harvard Pilgrim is eliminating the plan we're on come April 1, and that the plan they're shifting us too (with higher co-pays) will be even more than what we're paying right now! Almost $1400!

So I talked to him about an HSA. He says that we're really not candidates. With three young children, he does not recommend it for us whatsoever. So we are going to do what I described earlier in this thread. We're switching to a much lower-tiered plan that will be $872 a month. And the difference ($105 a week!) will be partially used in our own personal debit account for medical purposes only. Though our office visit co-pays will go up from $10 to $20 and prescriptions will go up (not sure how much), we certainly will be saving money. And the account will accrue quickly enough that I won't be too worried about emergencies after a few weeks (ER visits will be $100 and hospital admittances $500 a night). And it will only take five or six months to accrue our total out-of-pocket maximum. This is definitely the way to go for us.

Again, the only disadvantage being that since it's not a true HSA, the money we "bring home" will be taxable. But in the long run for our situation, it's well worth it.

[Dave McClung]

HDHP (High Deductible Health Plan)
HSA (Health Savings Account)

I'm considering if this is something that would be better for us than our state-subsidized health insurance plan (which seems to be struggling, both politically and financially).

Does anyone have experience setting this up for your pastor? (Or, are you a pastor who is currently using this sort of an arrangement?)

What are the ins-and-outs?
What are the tax benefits?
When is the money taxed (on contribution or on withdrawal)?
Does this have a long-term stability?
Will it cost the church more?
Will it cost the pastor more?
Will it diminish benefits significantly?

Should I be asking any other questions?

Jon

Most of your questions can't be answered without a basic understanding of health insurance. Let me give you a quick lesson.

The concept of any type of insurance is "risk shifting." Those who buy insurance pay a premium for the insurance company to accept the risk of a loss. In the case of health insurance, almost everyone incurrs health costs, so the insurance works to average costs.

The second element of health insurance is cost control. Because of the way health insurance has developed in the U.S., the insurance companies are able to negotiate with health care providers to get cheaper rates. If an uninsured person seeks health care, the cost is often double the amount paid by an insurance company.

The third element is the makeup of the group covered by the health insurance. A group that includes both young and old, sick and unhealthy will have a lower health care cost than a group that includes only the old and sick individuals.

The fourth element is who pays the health insurance premium. If an employer pays the premium for the employee, the cost is a tax deductible cost of business. If an individual pays the premium it isn't tax deductible.

The High Deductable Health Plan is an insurance plan that covers only the large losses. The concept is that the insured will pay the normal health care costs and will buy insurance for the unusual costs. The concept is a good one as long as the insured still has access to the barganing power of the insurance company for the normal health care costs. The question to ask is, "When I go to the doctor for a routine visit, who pays the bill?" If you pay the bill directly, it's a bad deal. You will pay more than the insurance company.

To give a personal experience, I recently had a neculear stress test. The bill to me was $4,400. The insurance company setteled the bill for $2,800. If I had been paying the bill directly, I would have had to pay the full amount.

The Health Savings Account is a way to make your health care costs tax deductible. If you are in a tax bracket that makes the potential savings worth the administrative cost, it is a good deal.

To answer your questions about whether or not it will cost more over the long term, one would have to know your health. A healthy person will save money with the HDHP and HSA approach. A person with a large family or with health problems won't.

[Ryan Scott]

This is just another reason why I'm not too interested in having kids.

I never get sick and was able to find a really great plan for $62 a month (obviously because of my age and lack of medical issues). My wife is covered through her job and we pay about $75 a month to receive dental and vision coverage through them.

So far it's worked out well and $62 is a lot better than the $450 a month is would cost to add me to her work policy.

I know all those numbers sound great to a lot of you, but $450 seems a bit excessive when I generally have no medical expenses in a given year.